India’s thirst for natural resources is not comparable to China and its impressive 7 percent average economic growth is not as high as China’s thundering 9 percent. But India still faces a dire energy shortage that needs to be addressed; and clean technologies seems to be the best possible answer for now.
The expanding Indian population, expected to surpass China in 2030, increased overall energy demand by 3 percent in the last 15 years, while demand for oil and coal has quadrupled. This has brought about energy deficit – from April to December of 2009, energy deficits ran at 9.8 percent, forcing factories across the country to enact blackout periods during peak demand.
The Indian government has taken action to offset these risks by investing in the increasingly lucrative clean technology industry. Although India’s cleantech market is not nearly as mature as China’s, focused government activity and potential opportunities have heightened interest in the sector.
In 2009, Indian cleantech attracted $2.3 billion in private investment, placing it tenth in the G-20’s investment ranking, well behind China’s leading position at US$34.6 billion. The market’s five-year growth rate was 72 percent, which put India ahead of developed countries like Canada but still behind China’s 147.5 percent growth.
Indian clean tech attracted US$190 million in venture capital, down 13 percent from the previous year. Compared to China’s US$331 million in VC investments, roughly equal with its 2008 figures, India’s drop in investment reflects both the impact of 2009’s economic downturn and slight vulnerability of its still-nascent cleantech market.
Despite this downturn in private investment, the Indian government has remained committed. The Union Budget of India for 2010-2011 allocated an unprecedented 46 percent of the total budget to develop infrastructure. This includes a 61 percent budget increase totaling US$223.5 million directed to the Ministry of New and Renewable Energy as part of India’s comprehensive National Action Plan on Climate Change.
The sector that attracts the most investment is energy generation, which, including bioenergy and small hydropower largely mirrors China top cleantech industries although not the same volume. India is also one of the world’s top producers of wind energy with an annual 10,891 megawatts, just trailing China’s 12,200 megawatts.
With so much needed infrastructure construction—80 percent of the India of 2030 is yet to be built—and new government backing, the opportunities in smart infrastructure development and energy are great. But challenges exists.
Complex bureaucracy in India has inevitably acted as a barrier to efficiency. The policy disconnect between government ministries, states, and sub-sectors makes it difficult for direct national policy to penetrate the layers of red tape and local interest that separate political jurisdictions. In this constant management flux, India is still working to overcome the traditional obstacle of clean technology that has previously hampered its development worldwide: high capital costs and high risk. Meanwhile China is solving the problem with forward-thinking, deep government commitment, but India still needs to navigate past this barrier.
“India’s problem is not lack of knowledge but the lack of successful transition from research-based knowledge to sustainable commerciality,” says Jairam Ramesh, Minister of Forests and the Environment.
With 500 million of its people lacking access to electricity and instead relying on dirty coal, India has the potential to make leaps and bounds in renewable energy and clean technology.